1/4% Tax on all stock trades pushed in NY Times today

Every 90 days I send a polite email or fax to my Senators and Congressman to express my opposition to the financial transactions tax. Until now, the responses I got from them were unfocused and ambiguous. However, the specificity of this response from Senator Feinstein tells me that our congressional representatives are beginning to focus on the FTT. Her response is not as specific as I would like (i.e., the Senator saying she is against the FTT), but it's a definite change of tone from her previous vague responses.

I encourage you to contact your congressional representatives regarding the FTT.

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From: Senator Dianne Feinstein
Date: January 12, 2012

Thank you for contacting me to express your concern about proposals to impose taxes on financial transactions. I appreciate the time you took to write and welcome the opportunity to respond.

I understand your concern that a financial transaction tax could negatively impact Americans who invest through retirement accounts and mutual funds. I believe strongly that Congress must work to ensure that Americans have sufficient savings to cover their health and living costs for the full duration of their retirement, and I understand that investments in stocks and bonds are an important part of many Americans' retirement savings.

There are currently a number of proposals to impose a tax on financial transactions. Senator Harkin (D-IA) introduced the "Wall Street Trading and Speculators Tax Act" (S. 1787) on November 2, 2011, which would impose a 0.03% tax the transfer and sale of stocks, bonds, and derivatives with the goals of curbing unnecessary financial speculation and reducing the national debt. This legislation is currently awaiting debate in the Senate Committee on Finance, of which I am not a member.

Representative Chaka Fattah (D-PA) has also introduced more wide-sweeping legislation, the "Debt Free America Act" (H.R. 1125), which would repeal the individual income tax and impose a one percent fee on the transfer of all stocks, bonds, or other financial instruments. The one percent fee would also apply to financial transactions every American participates in, including all payments made via check, cash, or credit card. The bill is currently awaiting consideration by the House Committee on Ways and Means.

Once again, thank you for writing. Please be assured that I have noted your opposition to imposing a tax on financial transactions, and will be sure to keep your comments in mind should relevant legislation come before the Senate for a vote. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

Wishing you a happy 2012.
Sincerely yours,


Dianne Feinstein
United States Senator
 
Y'know, I wonder if there's any traction to be had in explaining to people why a tax on financial transactions is NOT analogous to a tax on, say, toothpaste.

Rightly or wrongly, goods and services are taxes at the retail level. They are not taxed on the wholesale level, because acquire goods with intention of reselling at a profit, which is then taxed.

In a sense, the government taxes utility. In the case of a consumer, that utility is taxed at the point of purchase. In the case of a retailer (or business), that utility is taxed at the point of profit.

That is why financial transactions are not taxed. There is not utility to the parties in the transactions themselves, only in the intended profit, which is taxed, if realized.

So the question is not "Why does the tax code treat financial transactions treated differently from all other transactions?" Because IT DOESN'T.

The question real is, "Why single out financial transactions for double taxation."

Thoughts, anyone?
 
Quote from tortoise:


The question real is, "Why single out financial transactions for double taxation."

Thoughts, anyone?
More...


That maybe the case in the US.

But in the UK and maybe other countries, property and shares are already taxed when transacted. Then taxed again if a profit is made (at least in the case of second properties, main residences are exempt in the UK).

These transactions taxes were passed and increased over the years without much objection as traditionally property and shares always went up in the long term.. supposed to be easy money/guaranteed profit if you hold long enough.
Derivatives trading (and short term trading of stocks and everything else) is a different matter, one party nearly always loses on the deal.
 
Quote from tortoise:

Y'know, I wonder if there's any traction to be had in explaining to people why a tax on financial transactions is NOT analogous to a tax on, say, toothpaste.

Rightly or wrongly, goods and services are taxes at the retail level. They are not taxed on the wholesale level, because acquire goods with intention of reselling at a profit, which is then taxed.

In a sense, the government taxes utility. In the case of a consumer, that utility is taxed at the point of purchase. In the case of a retailer (or business), that utility is taxed at the point of profit.

That is why financial transactions are not taxed. There is not utility to the parties in the transactions themselves, only in the intended profit, which is taxed, if realized.

So the question is not "Why does the tax code treat financial transactions treated differently from all other transactions?" Because IT DOESN'T.

The question real is, "Why single out financial transactions for double taxation."

Thoughts, anyone?
More...

Your argument is correct and extended upon by the 2010 IMF study on the FTT:

http://www.imf.org/external/np/g20/pdf/062710b.pdf

It is a weakness of the FTT that it taxes transactions between businesses, including indirectly through the impact on the prices of non-financial products. The argument that an FTT would cause little distortion because it would be levied at a very low rate on a very broad base is not persuasive: it is a central principle of public finance that if the sole policy objective is to raise revenue then taxing transactions between businesses (which many financial transactions are) is unwise: distorting business decisions reduces total output, so that more could be raised by taxing that output directly. A tax levied on transactions at one stage ‘cascades’ into prices at all further stages of production. This is why, for instance, most countries have found the VAT— which effectively excludes transactions between businesses—to be a more efficient revenue-raiser than turnover taxes. In pure revenue-raising terms, there are more efficient instruments than an FTT.
 
Quote from tortoise:

That is why financial transactions are not taxed. There is not utility to the parties in the transactions themselves, only in the intended profit, which is taxed, if realized.
More...

EXACTLY!

They are taxing POTENTIAL utility... which is complete BS.

An analogy is if a store was taxed every time a customer walks through the door... regardless of whether or not they make a purchase.

I mean people going into a store and not buying anything is also "socially useless" -- why not tax that activity?
 
No new facts, but still interesting article:

Financial Transaction Tax: The EU’s Trojan horse?

Cameron is annoyed:

Cameron is so against the so-called Tobin Tax proposal that he has instructed his diplomats preparing the summit to do everything in their power to stop the issue being put on the agenda of the January 29th showdown in Brussels.
More...

About tax methods:

Officials said any new plan would still use the “residence principle”, but one idea is to require any financial product issued by a government or company in the transaction tax area also be subject to the levy, regardless of where the parties executing the trade are based.

Another proposal under consideration is to collect the tax via the post-trade plumbing of the financial system, through which financial transactions are cleared and settled. This could potentially allow Eurozone governments to tax euro-denominated derivatives trades, which are much harder for the taxman to capture, even when they take place between two British institutions.

However, both ideas are legally contentious and commentators say they will inevitably lead to flare-ups with Britain, particularly over how the tax is collected. So any Eurozone-only tax will certainly raise more serious legal questions than answer concerns.
More...
 
Quote from Rantany:

Cameron is annoyed:

-------------------------------------------------------------------------------
Cameron is so against the so-called Tobin Tax proposal that he has instructed his diplomats preparing the summit to do everything in their power to stop the issue being put on the agenda of the January 29th showdown in Brussels.
--------------------------------------------------------------------------------
More...

Why wouldn't Cameron want it brought to a vote? There's no way to get a unanimous vote supporting either EU or EZ FTT.
 
Quote from tortoise:

Y'know, I wonder if there's any traction to be had in explaining to people why a tax on financial transactions is NOT analogous to a tax on, say, toothpaste.

Rightly or wrongly, goods and services are taxes at the retail level. They are not taxed on the wholesale level, because acquire goods with intention of reselling at a profit, which is then taxed.

In a sense, the government taxes utility. In the case of a consumer, that utility is taxed at the point of purchase. In the case of a retailer (or business), that utility is taxed at the point of profit.

That is why financial transactions are not taxed. There is not utility to the parties in the transactions themselves, only in the intended profit, which is taxed, if realized.

So the question is not "Why does the tax code treat financial transactions treated differently from all other transactions?" Because IT DOESN'T.

The question real is, "Why single out financial transactions for double taxation."

Thoughts, anyone?
More...

Great idea Tortoise and like your line of reasoning. The pro-FTT people keep saying that financial transactions have skirted the tax man and they should be taxed like VAT or sales taxes. Why tax milk but not stocks etc. So good to tackle this clearly and take away this argument. Keep pressing here, thanks for your great work on FTT too!
 
Quote from Rantany:

No new facts, but still interesting article:

Financial Transaction Tax: The EU’s Trojan horse?

Cameron is annoyed:

About tax methods:
More...

You dig out the best stuff on FTT, thanks Rantany.

If FTT ever is passed in 9+ euro zone countries, or the euro zone - probably not just France - it will surely be designed to explode in London, especially if France and Germany have signed on as part of the reckless 9 (it won't happen without them either).

So the legal battles will commence big time over extra-territorial-tax reach, contravention of sovereign tax treaties, contravention of EU treaties, and constitutionality in different countries too.

It will be a new employment act for law firms, especially in London, Paris and Frankfurt and Berlin. If the tax doesn't explode in London, France and Germany will be throwing away their financial sectors and giving them lock-stock-and-barrel to London and other non-FTT money centers, so an exploding FTT is expected.

FTT explodes in NYC and Chicago, plus China, Switzerland and throughout Asia, so this will be a messy G-20 situation. Why couldn't the French and Germans listen at the G-20 and take no for an answer on FTT?

Once the lawyers get involved, things will turn even more sour and that will undermine the EU, euro zone and PIIGS recovery even more. France and Germany are being reckless to go down this slippery slope and Cameron is right to be upset.
 
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